Navigating the Regulatory Environment Around Usage-Based Insurance

Transcription

1 Navigating the Regulatory Environment Around Usage-Based Insurance CAS 2017 RPM Seminar, March 29, Antitrust Notice The Casualty Actuarial Society is committed to adhering strictly to the letter and spirit of the antitrust laws. Seminars conducted under the auspices of the CAS are designed solely to provide a forum for the expression of various points of view on topics described in the programs or agendas for such meetings. Under no circumstances shall CAS seminars be used as a means for competing companies or firms to reach any understanding expressed or implied that restricts competition or in any way impairs the ability of members to exercise independent business judgment regarding matters affecting competition. It is the responsibility of all seminar participants to be aware of antitrust regulations, to prevent any written or verbal discussions that appear to violate these laws, and to adhere in every respect to the CAS antitrust compliance policy. 2 Disclaimer The views expressed by the moderator in this presentation are his views at this point in time. These views are not necessarily identical to those of the CAS or the moderator's employer. 3 1

2 UBI-quitous UBI now available in all 50 states* An estimated 5 million UBI policies in U.S. (IHS, 2015) *California only allows UBI based on mileage 4 UBI Proliferation in Personal Auto 1999 Progressive Autograph National General OnStar PAYG ProgressiveMyRate Nationwide SmartRide Safeco Teensurance State Farm Drive Safe and Save Travelers Intellidrive Esurance DriveSense Liberty Mutual RightTrack MetLife My Journey American Family MySafetyValet MapfreDriveAdvisor Bankers Ins. DriveSure 2016 Club Insurance Company ROOT Donegal Insurance Group DriveSync AAA AAADrive GMAC Low-mileage discount ProgressiveTripsense CSAA udrive Safeco Rewind Unigard RateFlex Allstate Drivewise Progressive Snapshot Hartford TrueLane MetroMileMetroMile Plymouth Rock Group D-rive Pennsylvania National PennID Iowa Farm Bureau Driveology Motorists Mutual Group MiTrip GuideOne UBI discount American Family KnowYourDrive 5 Model variables used by top-10 insurers Eight of the top ten personal auto writers have active UBI programs. Here s what data elements their models use for scoring: Mileage Braking Time of Day Speed Acceleration Cornering 6 2

3 New programs by technology type 1999 Progressive Autograph National General OnStar PAYG ProgressiveMyRate Nationwide SmartRide Safeco Teensurance State Farm Drive Safe and Save Travelers Intellidrive Esurance DriveSense Liberty Mutual RightTrack MetLife My Journey American Family MySafetyValet MapfreDriveAdvisor Bankers Ins. DriveSure 2016 Club Insurance Company ROOT Donegal Insurance Group DriveSync AAA AAADrive GMAC Low-mileage discount ProgressiveTripsense CSAA udrive Safeco Rewind Unigard RateFlex Allstate Drivewise Progressive Snapshot Hartford TrueLane MetroMileMetroMile Plymouth Rock Group D-rive Pennsylvania National PennID Iowa Farm Bureau Driveology Motorists Mutual Group MiTrip GuideOne UBI discount American Family KnowYourDrive Mobile-based UBI programs 7 Existing UBI programs of top insurers migrated to mobile in 2015 and 2016 State Farm Allstate Progressive Nationwide Liberty Mutual AAA 8 Law & Regulation 3

4 Public statements We encourage all New York auto insurers to submit plans to our Department making use of this innovative technology. (May 2014 Bulletin) New York Department of Financial Services it is beneficial to encourage the expansion of these programs in the state in that they offer more options to consumers. (Pay-As-You-Drive Insurance in Maryland, 2016 Annual Report) Maryland Insurance Administration Key Issues Data ownership Data privacy Data use (e.g., claims management, selling to third parties) Adverse actions Drivers who choose not to opt in Drivers who opt out prematurely 11 Who owns the data? No conclusive determination 1 Closest parallel: event data recorder laws Driver Privacy Act of 2015 (Federal) Vehicle owner or lessee owns the data EDR data can t be shared with other parties without owner s consent, except in certain situations Sixteen states have also enacted laws with more or less the same effect 1 Pomerantz, Frederick J. and Aisen, Aaron J. Auto Insurance Telematics Data Privacy And Ownership, Mealey s Data Privacy Law Report, Vol. 1, May

5 Adverse actions? Virginia : No surcharges or unfavorable rating tiers solely because a vehicle owner refuses to allow access to recorded data Delaware Insurance Code 3918: No telematics device installation without policyholder consent In AR, MT, ND, OR, VA: No requiring EDR data access as a condition of an insurance agreement and/or as a condition for settlement of a claim 13 Sources Dimitris Karapiperis, et al. Usage-Based Insurance and Vehicle Telematics: Insurance Market and Regulatory Implications. CIPR Study, March Pomerantz, Frederick J. and Aisen, Aaron J. Auto Insurance Telematics Data Privacy And Ownership, Mealey s Data Privacy Law Report, Vol. 1, May 2015 Privacy of Data From Event Data Recorders: State Statutes, National Conference of State Legislatures 14 VESM Rule Filing Our Experience at ISO 5

6 Transparency vs. confidentiality On one hand Public filings: Sufficient information to understand data variables model characterization results 16 Transparency vs. confidentiality On the other hand Private information: Protection innovation trade secrets Confidentiality in some jurisdictions more details about model continue confidential treatment during correspondence 17 State-by-state strategies Regulation varies be aware balance disclosure and transparency Teleconferences and presentations reviewer comfort audience dictates the content communication helps Advance preparation filing differences expected questions 18 6

7 Regulatory comfort zones Generalized linear models (GLMs) common and well-understood readily accepted by many regulators Machine learning algorithms VESM uses a random forest technique relatively new to U.S. property/casualty industry less familiarity 19 Regulatory comfort zones Standard GLM questions/answers not appropriate obstacle to understanding and interpretation sometimes analogous information exists, but sometimes it doesn t! Teleconferences helped clarify methodology and testing explain certain concepts answer regulators questions As a result, we were successful in obtaining regulatory approval/acknowledgement 20 VESM filing timeline March 2016 Begin VESM multistate filing Goal to file in 46 jurisdictions September 2016 VESM rule approved in 38 jurisdictions States with lengthier back and forth approve here March 2017 VESM approved in 43 jurisdictions 3 approvals from final goal June 2016 VESM rule approved in 28 jurisdictions Approved in 17 jurisdictions less than 1 month after filed December 2016 VESM approved in 41 jurisdictions 21 7

8 Regulatory landscape Increased scrutiny vs. other filed rules more jurisdictions more questions more detailed questions We expect even more awareness and scrutiny UBI more ubiquitous technology and regulation continue to intersect 22 Fast facts Number of UBI 3rules filed by ISO Number of states that outsourced VESM rule filing to consultant 4agencies 5 Number of teleconferences ISO had with various state regulators to discuss VESM rule 9 Words used most in regulator correspondence 25 Number of jurisdictions that sent RCT objections to filed VESM rule rate risk group data telematicsvesm modelscore variable 38 Most questions ISO received from one state on the VESM rule 23 Thank you. Questions? 24 8